Labor Market Reforms in Italy in the Aftermath of the 2008 Crisis

The Italian economy has been affected for the past five years by the combined problems of sluggish GDP growth, high unemployment, and high levels of public debt, which all threatened international markets’ confidence in Italy’s economic performance. European institutions’ pressures for structural reforms were leveraged through various forms of implicit conditionality (Sacchi 2015), especially tied to the purchase on part of the ECB of Italian government bonds on the secondary market. These exogenous pressures resulted in two major labor market reforms: the Fornero Reform (l.n. 92/2012) and the Jobs Act (l.n. 183/2014). The two reforms are in continuity with each other in terms of rationale and policy content. Their stated objective was to incentivize the establishment of more permanent employment relationships by softening the “rigidities” of the Italian labor market, beginning with the dualism between the levels of protections afforded to so-called “insiders,” (workers on standard, open-ended employment) and “outsiders,” (workers in atypical or temporary employment). In both cases, the reform strategy unfolded in two steps: First, a broad deregulation in the area of employment protection legislation (EPL), especially in dismissal protection for open-ended workers. This was then accompanied by increases in the level of protection afforded through the unemployment benefits system to labor market outsiders.

In the sphere of EPL, the Fornero Reform promoted monetary compensation—rather than reinstatement, as provided by the article 18, Law n. 300/1970 (Workers’ Statute)—in case of unfairly dismissed workers in medium and large firms. The Jobs Act further restricted such “reinstatement principle” by suspending for three years its validity to all new hires, making open-ended contracts a “contract with increasing protections.” In the sphere of unemployment protection, the Fornero Reform created a new type of ordinary unemployment insurance, the ASPI, marginally more generous than previous benefits, and a new instrument, the “Mini-ASPI,” to cover workers with reduced contribution records—thus enlarging the pool of beneficiaries to recent labour market entrants. The Jobs Act merged these two instruments into the Naspi, with maximum duration slightly extended, and introduced two new benefits on a pilot basis: the DIS-COLL, a form of unemployment insurance for atypical workers, and the ASDI, a form of means-tested unemployment assistance. The two reforms contributed thus to increase the level of unemployment protection available to so-called labour market “outsiders,” in a direction of broad recalibration. The Jobs Act also included a number of interventions aimed at improving the functioning of the Public Employment Services and strengthening and modernising active labour market policies (Vesan 2016).

The political dynamics surrounding these reforms, though shaped by strong exogenous pressures especially from European institutions, coincided with the intentions of domestic policy-makers to pursue deregulatory reform projects. Both the Fornero Reform and the Jobs Act were implemented by coalition governments, a technocratic one run by Monti, and the other with the lead of Renzi and the centre-left PD (Partito Democratico). The modus operandi of the two governments shared some similarities, as both proceeded unilaterally, rejecting concertation with social partners and opting for limited episodes of consultation. For Renzi and the new PD leadership, this was motivated by an explicit desire to replace the traditional party-unions linkage with a new support base amongst labor market outsiders and self-employed workers (Picot and Tassinari 2015). On their part, unions’ reactions to government unilateralism differed. CGIL strongly opposed and staged a number of strikes against both reforms, whilst the other two main trade union confederations, CISL and UIL, were more accommodating in their attitude towards the government’s initiatives. Despite their divisions with regard to the reforms, the three confederations have displayed considerable capacity to coordinate their interventions on collective bargaining, establishing the criteria to measure union representativeness and, accordingly, the validity of collective agreements at the industry and company level.

The overall trajectory of the two main structural labor market reforms implemented in the crisis amounts to a broad project of liberalization of employment regulation, pursued with the stated objective of reducing insider-outsider dualism in the Italian labor market. Despite the recalibratory interventions in the sphere of unemployment protection, which might mitigate some of the deregulation implemented in the sphere of EPL, significant dualisms and divisions seem to persist in the Italian labor market following both reforms. The awaited shift towards open-ended employment as the norm for new labor market entrants is proving harder to achieve than 2015 statistics might suggest. In fact, since the monetary incentives for new hiring introduced by Jobs Act ended in January 2016, also the growth of new open-ended contracts halted. Besides, the divide between insiders and outsiders is finding a new expression, as the rise of “accessory work,” a form of occasional work remunerated through vouchers, demonstrates. Finally, other well-known features of the Italian labour markets’ dualism are far from disappearing, such as the inter-generational disparity in protections for older and younger workers, the gender gap in labour market participation, and the divergence in employment performance between Northern and Southern regions.

Stefano Gasparriis a Teaching Fellow in the Industrial Relations Research Unit and Organisation & HRM group at Warwick Business School. Arianna Tassinari is a PhD student in the Industrial Relations Research Unit and Organisation & HRM group at Warwick Business School.